NHR Tax expenditure static

Tax expenditure on non-habitual residents stagnated last year, compared to 2022, according to data recently released by the Tax and Customs Authority (AT). It is the first time this has happened since the creation of the regime.

According to a report for 2023, expenditure has not changed for income earned in high value-added activities by non-habitual residents on Portuguese territory which stood at €.1.229,6Bn, exactly the value of 2022.

The tax authorities, however, draw attention that care had to be taken with the analysis of the data. “Particular care should be taken in reading the estimated amounts of tax expenditure”, says the AT since “in contexts where there is greater mobility of taxpayers or income (…) the increase in tax revenue that would result from the abolition or reduction of tax benefits would be much less than the estimated amount of tax expenditure.”

A tax benefit applies to taxpayers who perform high value-added activities, such as engineers, designers, researchers, scientists, among others. These workers benefit from a single IRS rate of 20% for 10 years, but it has undergone a significant change with the State Budget for this year, which limits the application of the regime created in 2009.

A transitional regime was created by the previous government keeping the tax incentive for scientific research and innovation only, accessible to people who, having not been resident in Portugal in the previous five years, become fiscally resident in the country and occupy jobs “in entities certified as startups, requiring a Government list to define the specific professions. This list was not published by the previous government, and recently the current Government announced it would do so as part of its tax incentives package for the economy.

After coming into force, the Tax Authority issued a statement clarifying that eligible taxpayers will be able to enrol for the non-habitual residents’ tax regime until March 31, 2025, and this registration takes effect in 2024 and will provide the tax benefit for 10 years.